Industry News

On September 24, 2024, the Center for Retirement Research (CRR) at Boston College released its issue brief, What Role Does State Government Play in Funding Teacher Pensions? CRR examined the role of state governments in funding teacher retirement benefits. According to CRR, “[A]bout two-thirds of states explicitly provide funds for teacher pensions, with 15 of these states paying the full cost on behalf of schools. The remaining third of states implicitly help with pensions through basic state aid to schools, but this aid seems to have fallen somewhat behind rising costs.”  

Specifically, 35 states (including Washington, D.C.) explicitly provide funds for some portion of teachers’ retirement benefits as of June 2024. The CRR findings indicate that 15 states (with 15 plans) explicitly fund all teacher pension costs and 20 states (with 24 plans) provide funds for a portion of the costs.

Since 2001, CRR reported that teacher pension costs have doubled as a share of payroll, up from about 8% to nearly 20% in 2024. It indicated that a significant portion of expenditures for school districts are related to personnel costs. Overall, school districts rely greatly on support from state government transfers for revenue.

According to the brief, 38% of state governments cover all of the annual required contribution (ARC) of teacher pension plans. In states that do not pay the full ARC, about 23% pay a fixed percentage of salary or a fixed dollar amount.

The brief is available here.